Calculating EVA Brewster Company manufactures elderberry wine. Last year, Brewster camed operating income of 5192,000 after come taxes, Capital employed used 2.1 milion Brewster's percent equity and 55 percent 10-year bonds paying 7 percent interest Brewster's maral taxes 40 percent. The company is considered a faily sky investment and probably commands a 12-pont premium above the 5 percentrate on long-term Treasury bonds Jonathan Brewster's sunts, Abby und Martha, have just retired, and Brewster is the new CEO of water Company he would be to prove for the company. Comoute EVA under each of the flowing independent scenarios that browser is considering Required Use a spreadsheet to perform your callation and round all interim and percentage figures to four decimal places. If the IVA is negative, enter your answer as a negative amount 1. No changes are mader calolote EVA using the original data 2. Sugar wit be used to replace another natural ingredient (atomic number 33) in the elderberry who. This should not affect costs but will begn to affect the market newment of Brewster Company, bringing the premium above long-term Treasury bills to 10 percent the first year and 7 petoeat the second vent Calculate devised EVA for both years. EVA Year: Year 2 $ 3. Brewster is considering expanding but needs additional capital. The company could borrow money, but it is considering more common stock, which would increase equity to 70 percent of total finanong. Total capital employed would be $3,000,000. The new after-tax operating income would be $300,000. Using the anal data, calculate EVA, Then, recalculate 1. No changes are made; calate EVA us the original data $ 2. Sugar will be used to replace another natural ingredient (atomic number 33) in the elderberry wine. This should not affect costs but will begin to affect the market assesment of Brewster Company, bringing the premium above long-term Treasury bills to 10 percent the first year and percent the second year collete revised EVA for bath years EVA Yeart 5 Year 2 5 3. Brewster is considering expanding but needs additional capital. The company could borrow money, but it is considering seling more common stock, which would increase equity to 70 percent of total financing Total capital employed would be $3,000,000. The new after-tax operating income would be $190,000 Using the data, calculate EVA. Then, recalculate EVA assuming the materials substitution described in Requirement 2. New ster-tax income will be $190,000, and at the premium wil be 10 percent above the long-term Treasury rate. In Year 2, it will be 7 percent above the long-term Teasury rate. (Hint: You will calculate three EVAs for this requirement.) EVA Year 1 5 Year 110 premium) 5 Year 2 (7% premium) $
